ForexYard's Commentaries
thanks forexyard.. it sure helps a lot..
our pleasure! if you have any questions or need recommendations, just ask!
Economic News
USD
Last week's main news came from the housing market, which delivered mixed signals as New Home Sales came in much stronger than expected at 981K on Thursday, and Existing Home Sales was released at a much lower figure of 5.99M with expectations for 6.14M. The news caused the greenback to retreat a bit and it weakened against most major currencies, yet in a quiet manner, as the market movements were not radical last week. Today, US markets will be closed for Memorial Day and no economic news is expected to be released today. Traders should expect low liquidity and almost no major price movement coming from the USD side of the world. The rest of the week as oppose to today will be packed with valuable news as we should be expecting Consumer Confidence tomorrow, the ADP employment index, GDP, FOMC Minutes, and the Nonfarm Payroll release on Friday. Regardless of the weak start, it is going to be an exciting week for the Greenback, which will most probably continue the weakening trend for now.
EUR
The EUR gained some strength last week, after the German Consumer Confidence came in at a much higher than expected 7.3, and the EUR/USD topped at 1.3470 after going through a downtrend for several days before. The GBP Price movement was very low on Monday as the UK GDP correlated with expectations and was released at 0.7%. The European market trading will begin quietly today, as no news is expected to come from Europe today due to whit Monday. The tranquil market behavior will continue today on top on the US markets being closed as well, and will focus the rest of the attention to the Asian markets.
JPY
The JPY continued to weaken last week, and carry trades continued steadily on the back of the CPI release, which came slightly weaker than expected on Friday. The Corporate Services Price Index (CSPI), which measures the rate of inflation experienced by corporations when purchasing services, was released last night at a much higher than expected figure of 1.1% with expectations of 0.6%. It looks as if the ongoing weakening trend continues today, with carry trades at full steam. The movement might even be sharper than usual as the Japanese markets will be in focus today with the US and UK markets closed today.
Technical News
EUR/USD
After the 1.3410 low last Friday, the pair is showing its first major signals of correction and is now consolidating around 1.3450. The hourly studies are turning bullish, and the dailies are unwinding from an oversold status. It looks as if the next target price will be around 1.3500.
GBP/USD
The pair has failed to break the 1.9800 bottom for the last three days, which set a strong support around that area. The dailies bullish and the hourlies are responding accordingly. It looks as if we are heading back to the 1.9950/2.0000 levels again.
USD/JPY
The pair has been going up non-stop since the beginning of March, and now shows some signs of consolidation. There is a bearish cross forming on the daily Slow Stochastic, which indicates that a correction down is inevitable but might not be imminent. The hourlies are still neutral, and selling on highs might be preferable.
USD/CHF
Last week the pair peaked at 1.2320, and than initiated a local downtrend, which appears to be steaming up and taking the pair back to the 1.2200 levels. The hourlies and the dailies support the notion that the move is down, yet due to low liquidity on the USD side, the move might be delayed a bit.
The Wild Card
GBP/JPY
After an extremely radical uptrend we see the first signals of price consolidation for the pair at the 241.30 levels. There is a clear bearish cross forming on the 4 Hour chart which provides Forex traders with the opportunity to get in the market at a very strong resistance level that might be the starting point of a local correction, or a long run reversal.
- After quiet trading day, traders may look to BUY Gold, Oil, or Silver today.
- Consumer Confidence on tap today.
Economic News
USD
The US Market was closed for holidays on Monday and market liquidity was very low. Today , the Conference Board is expected to release the results of its survey about Consumer Confidence. Consumer Confidence has been a major focus for economists these days, as it reflects consumer behavior and the effect it has on inflation and growth. The market expects a slight improvement to 105 in comparison to the previous 104 of last month. A stronger than expected figure will likely strengthen the USD and may take this pair under the 1.3400 against the EUR for the first time in almost 2 months .
Tomorrow, expect the release of the minutes from the latest Fed meeting on May the 9th. The Fed kept rates at 5.25 % and the market will closely read the statement for signals about an upcoming rate cut. It's very important to watch the balance between the risk for high inflation and the risk for declining economic growth, trying to find a clue where the rates are going in the US.
EUR
Yesterday, Monday, The European markets were closed due to a holiday, Whit Day, as was the case in the US, for Memorial Day. As such, market liquidity was very low. Despite the fact that the majority of forex players were away form their desks, the forex market remained open and as always, interesting.
The EUR weakened against the dollar after mixed data released in the Euro zone. French consumer spending came in below expectations dropping to -0.3 percent with CPI in Germany coming in moderately and GFK consumer confidence releasing better-than-expected at 7.3 percent. In the short term as it looks, the EUR/USD is going to move closer to the 1.34 level.
JPY
Yesterday , a day that most of the major markets were closed for holiday, the JPY was up on the GBP and stable against the USD and EUR. The Japanese currency has been trading near record lows and despite its recent revaluation, against the American Dollar it looks the JPY will remain pressured. It looks as though the JPY will keep tapering down against the dollar and Euro specially after Japan's CPI released in line with expectations at 0.0% headline and -0.1% core and a serious correction is not expected in the short term. The JPY has fallen 4%against the EUR and 2.2% versus the USD this year due to the fact that many investors borrow yen in order to buy higher-yielding assets overseas, which is called a "carry trade". This strategy will be in place for the near term. The dollar's advance may stall around 121.90 to 122 because of sell orders placed by Japanese exporters and options barriers. The yen may fall to 123 per dollar by June 30.
Today at 0:50 GMT data were published in Japan: Overall Household Spending, Retail Sales, Small Business Confidence, and the Jobless Rate. Japan's jobless rate fell from 4% to 3.8% which is a nine-year low, and household spending increased by 1.1% for a fourth month in a row in April. Retail Sales data fell for a second month in April, making it more difficult for the Bank of Japan to raise interest rates from 0.5%, the lowest among industrialized nations.
For the first time in nine months the jobs-to-applicants ratio improved in April. The jobs-to-applicants ratio climbed to 1.05 from 1.03 a month earlier, the number climbed to 14-year high of 1.09 last July. The number of full-time employees grew last year for the first time since 2003, and the goal of the Japanese government is to maintain this trend. Even so, while job openings have outnumbered applicants for more than a year, the demand for labor has not driven wages higher. The Average wages declined for a fourth month in March after rising 0.3 percent. Japanese companies continue to hold down labor costs, so it's hard to expect on the short term a dramatic improvement regarding the wages issue.
Technical News
EUR/USD
In the last couple of days, we have witnessed a tight range trading between the 1.3411 support and the 1.3471 resistance.
On the 30 MIN chart a reverse head & shoulders pattern is forming however not yet completed. In the chance that it will be completed we are expecting an upcoming bullish trend which will take this pair to 1.3459 (Fibonacci). Going long if the pair reaches 1.3435 would be the preferable strategy today.
GBP/USD
On the 4 H chart it can be observed that the bulls are on their way and the GBP will likely strengthen against the. A Doji was established and after breaking the tight channel resistance barrier, this pair may continue consolidating at the 1.9880 level in the upcoming days.
USD/JPY
On the 2 H chart, a falling wedge is to forming in a downtrend which may imply of an upcoming bullish trend. Also the Slow Stochastic is crossing at 9, giving us another signal on the upcoming reversal. Going long at the 121.30 may be the preferable strategy.
USD/CHF
This pair is trading in a tight range in the last 5 days however today the channel boundaries might be breached when a rising wedge in a downtrend is to be established, this pattern may take this pair up to the level of 1.2315.
The Wild Card
AUD/JPY
On the 2 H chart a double bottom pattern is forming which implies an upcoming reversal. RSI at 18 and Slow Stochastic crossed at 15 only strengthening the possibility that this forex pair will consolidate at the 99.90 - 100.00 by the end of this trend.
Preferable strategy may be to go long.
Economic News
USD
Yesterday the most significant news to come out of the US was the Consumer Confidence Index which rose to 108 this month from a revised 106.3 in April, a five month low. The market was expecting a figure of 104.5 so this unexpected jump signaled that consumers are continuing to spend despite the prevailing record high gasoline prices and the housing market downturn which was expected to leave consumers with an insecure feeling about their finances. However rising stock prices and a resilient labor market is driving consumer spending which makes up a lion share of the US economic growth. This raises the likelihood that the Federal Reserve's forecast for ``moderate'' growth in the coming quarters will be realized. It is also important to note that consumers' expectations for the inflation rate for 12 months from now were 5.5 percent in May, the highest in a year so the Fed is considered more likely to raise interest rates when inflation is higher, making dollar-denominated investments more attractive. On the back of this positive news the greenback realized marginal gains all across the board and it drove the EUR below the 1.35 level against the USD. However not all was rosy for the dollar as the positive news was partially offset by concerns about central bank moves in Europe and the Far East to diversify currency holdings and once traders see that the central bankers are on the other side of a trade they usually go with that momentum. The Consumer Confidence Index kicks off a week of reckoning for the dollar, with the market set to make crucial decisions about the near- term outlook for US interest rates in the wake of a stream of crucial economic data, most notably Friday's Non-Farm Payrolls report for May. So we could see some sharp dollar movement on the back today's release of the ADP employment index which is our first leading indicator for payrolls. If this figure releases better than expected coupled with hawkish FOMC meeting minutes then we could see the dollar go on a bullish rampage.
EUR
Yesterday the European current account was reported at an unexpected surplus of 5.4B bouncing out of previous negative territory. The market forecasted an increase in the Euro-zone current account deficit of -4.3B, so this unexpected surprise boosted the EUR and although it gave back most of its intraday gains it was still the best performing currency against the greenback. In other news the German CPI released inline with expectations at 0.2% indicating that although consumer prices dropped from last months' figure of 0.4% they are still relatively stable. The strong EUR does not seem to be negatively impacting the European economy as indicated by the current account surplus and many traders believe that the ECB's main refinancing rate will be 4.25% by September. This sentiment, which was the other main driver of the EUR boost, was further reinforced by comments made by the ECB member Weber stating that the current cycle of interest rate increases has not yet reached its end. Weber also indicated that policymakers will stop utilizing "code words" to signal interest rate changes when the current monetary tightening cycle ends. He also defended the ECB's utilization of the M3 money supply indicator in formulating monetary policy, noting broad money has increased 10.9% y/y in March.
Today the only news coming out of the Euro-zone is the German and French Retail PMI. These figures are not expected to cause any volatility, so the EUR should range trade today against the majors but there is a possibility of sharp movement against the greenback if the ADP employment index springs a surprise.
JPY
The yen edged higher yesterday, after China said it would raise a stamp duty on stocks in an attempt to cool its equity markets, prompting concerns about risky trades financed by borrowing in the Japanese currency. The EUR dropped against the yen, after touching an all-time high, and U.S. stocks fell on expectations that the move by China may prompt further losses in global equity markets and heighten risk aversion, this is a clear attempt by the Chinese to restrain the equity boom. The Chinese authorities raised the stamp duty on share trades to 0.3% from 0.1% starting today. In the 16-year history of the modern Chinese stock market, an increase in stamp duty has always caused a market slump over the following few weeks. If this move by the Chinese results in heightened risk aversion we could finally see the unwinding of carry trades. The yen retained most of the gains it gathered earlier from strong Japanese economic data, which reinforced expectations that the Bank of Japan will raise borrowing costs again in the coming months. News that Japan's unemployment fell to 3.8% in April, its lowest level since March 1998, and spending by households in April jumped 1.1% in real terms, proved to be the major drivers in the currency markets as many of the world's major trading centers returned from the long holiday weekend. All the economic indicators released have shown improvement and traders have taken them as a lead to buy the JPY.
Technical News
EUR/USD
Yesterday, after a choppy trading session where the pair touched 1.3520 and then dropped to 1.3442, it appears to be consolidating. The hourlies are still oversold, and the daily studies give mixed signals with a slight tendency to the bearish side. Local target price might be around 1.3410.
GBP/USD
The pair touched 1.9900 yesterday, and now seems to be heading to the 1.9790 level which is the 50% retracement level of the 1.9680/1.9900 move. The hourlies show that the negative steam is about to be over, and a bullish cross is forming on the 4 Hour chart, indicating that there might be a move up again.
USD/JPY
The massive upwards channel on the daily chart shows no signs of regression, as the slow stochastic supports the notion that the move continues. The hourlies are showing that the current price level is on the bottom of the channel which indicates s good entry point before the additional move up begins.
USD/CHF
After peaking at 1.2320 several days ago, it looks as if a local channel is forming on the 4 Hour chart on the bearish side. The pair now floats at the upper level of the channel, and together with the bearish slow stochastic the conclusion appears to be a further move south, possibly to the 1.2185 levels.
The Wild Card
USD/CAD
The pair has been showing one the most impressive downtrends currently happening in the forex market. For more than six months now we see the pair nose dive. All the momentum indicators shows that down is the way to go here, and at this point it looks very lucrative to swing a short position on this phenomenal downtrend.
Economic News
USD
With the dollar barely moving now, this the 4th day in a row, many traders have begun asking themselves 2 questions: 1. What's holding the dollar up 2. What's the reasons which may cause the dollar to crumble under pressure again? Let's start with the basics: for starters, there are a lot of economic releases expected today and tomorrow ranging from inflation to employment data. The reason the dollar has barely moved is due to the fact that the market is awaiting these news releases. Will the dollar crumble thereafter? The real question is not this but rather will the dollar break record lows again? This question is on the minds of traders as we head to this Friday's Payrolls release, an indicator that has been known to topple the dollar in the past, especially when the American economy was seen as lackluster - as it is now.
The real worry for traders is today's GDP release. Traders should recall the previous release, on the 27th of April, which helped the dollar make its recent gains. It should also be noted that since that date, bonds, equities, and the dollar have all made significant gains. Today, however, with markets expecting a significant slide in the GDP figure, down to 0.7-0.8% (from 1.3%), this could well mark the end of the dollar's ride.
We look to this figure above all others as the sign of future bodings for the forlorn dollar. It may well be that it is overbought at this point and traders will look for bad news to dump the dollar and fast. We suggest alertness
EUR
The EUR/USD which is typically the most traded currency has become the most stagnant. The EUR/USD has been stuck within a 50 pips trading range for the past 24 hours and a quick look at the charts will reveal a tight trading range for the past week. With the European Central bank scheduled to meet on June 6, incoming economic data has done little to clarify whether the central bank will raise rates in June. Today the Euro-zone retail PMI dropped back into contracting territory. This suggests that consumer spending was very weak in April and possibly in May as well. In addition to that disappointment, M3 money supply which is an inflationary indicator also fell short of expectations, signaling that inflationary pressures may be abating. It may seem that data is beginning to weaken, but there are still a lot of data that could shift the outlook either way. In the next 24 hours, we are expecting German and French unemployment along with French PPI and Euro-zone consumer confidence. Meanwhile the Swiss franc is stronger against the Euro ahead of its first quarter GDP release tomorrow.
JPY
The Japanese Yen is stronger against all of the major currencies with the exception of the Australian and New Zealand dollars. Even though the US stock market has not responded negatively to the move in the Shanghai index, and actually made gains yesterday, carry traders need to be very careful in the weeks to come. If the Shanghai stock market rebounds and refuses to fall, the Chinese government will become even more anxious about cooling the stock market. As a result, they could take more aggressive measures which would only put further pressure on carry trades.
No economic releases are expected from Japan until next week so look for the JPY to trade based on the moves of the USD.
Technical News
EUR/USD
The pair recovered most of the losses after nailing a new low for its short-term downtrend. The pair should trade sideways to lower today. It has strong support at 1.3400. If this level breaks, look for a test of the support at 1.3375. Below this Fibonacci retracement level there is support at 1.3275. Immediate resistance is at 1.3460. Next resistance lies between 1.3520 and 1.3530. A close above 1.3545 would signal another attack on the upside to 1.3610, but this is unlikely.
GBP/USD
We have retraced to almost 78.6% of last week's rally at 1.9720, which is the support we mentioned yesterday. The Sterling should make a good effort to base here and try to rally back to 1.9900 and eventually 2.0000. We suggest to keep long position today, and be willing to re-buy on a drop to 1.9680 (last week's low) if stopped out today.
USD/JPY
Despite yesterday's fall to 121.16, the subsequent rebound after trading above indicated support at 120.85 has retained our consolidating view and above 121.89 resistance would confirm up move has resumed in final leg of Elliott Wave for marginal rise to 122.00 but this year's high at 122.20 should hold from here and bring a strong pullback later this week.
USD/CHF
If resistance at 1.2265 is broken today, the Swiss Franc will target the zone around 1.2309. If successful the upward trend will continue towards 1.2342. If dropping under the support 1.2323, the currency pair looks for the next support around 1.2185. If that level is broken, the downward trend will continue towards 1.2144.
The Wild Card
CRUDE OIL
With support firmly in place at 62.6 and above this at 62.8, forex traders may find themselves at a loss as whether OIL will drop again. Most indicators point to NO, and the recent buy signal based by the MACD nearly confirms this. Look for support by the EMA to place BUYS.
04/06/'07 - The Market Calms Down After Friday's Nonfarm Payrolls.
Economic News
USD
On Friday, we saw the release of the Nonfarm Payrolls which came out stronger than the expected 135K at 157K. The strong figure immediately triggered high levels of USD volatility, especially against the EUR, making it almost impossible to trade the NFP session. USD/JPY behavior was much calmer, as the pair barely reacted to the extremely high release. The ISM Manufacturing on Friday was also released above expectations of 54.0 at 55.0 which helped to send the USD up, but only at the local level, as it was not enough to keep it high for a long time due to fact that the rest of the news releases came out weaker than expected. Core PCE Price Index came out at 0.1 which was lower than the expected 0.2. Personal Income Plummeted to negative -0.1% as Personal Spending increased to 0.5% creating a very wide gap between them which means that it's becoming harder for consumers to spend more with lower income levels. As for today, the US calendar is empty and seems to be very light for the rest of the week. We should expect US Retail Sales, PPI, and CPI starting on Wednesday. It looks as if a slight positive wind is blowing at the USD's and it remains to be seen whether it will continue as the rest of the week unfolds.
EUR
The EUR was one of the only currencies that could sustain the blow taken from the release of the Nonfarm Payrolls and came back exactly to where it started prior to the release. What caused the strong EUR behavior was probably the extremely strong German Retail Sales release which was expected to get out of negative territory of -0.1% into positive 0.1% and instead soared to 2.6%. Today the Euro-Zone PPI is expected be released at 10:00 GMT with a consensus of 0.3%. The highlight of this coming week will surely be the ECB Rate decision which is widely expected to hike 0.25% to 4.00%. If indeed the ECB will hike the rate we expect local appreciation for the EUR this week.
JPY
Carry trades continue with full steam as the JPY is trading at record levels against most major currencies. The JPY is traded at 242.00 against the GBP, 164.10 against the EUR, and 122.00 against the Greenback, very impressive figures on any scale. The Japanese market started this week with some positive figures as the JPY Monetary Base went up to -5.7% from a previous figure of -12.2, and the JPY Capital Spending went down from 16.8% to 13.6%. As for the rest of this week, there is no significant news events expected to be released from the Japanese market, and carry trades will probably continue to take the JPY lower to the next record low.
Technical News
EUR/USD
The pair is consolidating around 1.3450 which is a very important key level and a low point in the recent downtrend. The Daily charts are bearish, as the hourlies support the notion that the continuation of the downtrend is on the way. A correction up might happen but if a break through 1.3450 is made, then the right direction is certainly down.
GBP/USD
After touching the 1.9770 bottom on Friday, the pair seems to be forming an uptrend and is now floating around 1.9840. The hourlies are bullish, and the dailies support with the RSI indicating that the momentum is growing for the trend to grow stronger. The next target price is around 1.9920.
USD/JPY
The pair is peaking at 122.05 and is in the midst of a very strong uptrend which was initiated at the beginning of March. As for now all indicators support the bullish notion, together with bullish signals from the Daily studies. The hourlies are a bit overbought which indicates that buying on dips might be a preferable strategy today.
USD/CHF
There is an upwards channel pattern forming on the daily chart and the pair is now floating at the upper level of it. It looks as if the pair might test the bottom level at 1.2260 before the uptrend continues. If a break will occur on either side of the channel, we expect an additional 80 pip move.
The Wild Card
CAD/CHF
After a very impressive uptrend that started three months ago, the pair shows no signs of a stop. There is a price consolidation on the 1.1610 level, which provides forex traders with the opportunity of a great entry point for a swing trade. It looks as if the next price target is 1.1700.
Economic News USD Yesterday the greenback was mixed against most of the major currencies as investors sought to weigh US economic prospects amid hopes that the world's largest economy will pick up steam later this year. The USD strengthened slightly versus the JPY touching the 121.66 level, as a record intraday high for US stocks meant that carry trades were back in action, but the US currency lost some ground against the EUR falling to 1.3459 from Tuesdays 1.3447 level. Sentiment on the US economy has brightened in the past week following better-than-expected reading on jobless claims, a surprise rebound in new home construction and an unexpected strong rise in industrial production. Hence traders are buying back the dollar as they continue to digest this series of robust economic indicators. After two days of top-level economic talks in Washington, the US and China claimed to have agreed on the need for economic and currency reforms. Paulson said Chinese officials agreed with the United States that their economy had to be "rebalanced" to take on a greater role as a global consumer and cut Beijing's reliance on exports for growth. That would help reduce a U.S. trade deficit with China that hit an all-time high of $233 billion last year and ease tensions over China's economic success. The most significant deal announced yesterday was one that commits China to remove a bar on new foreign securities firms and resume issuing licenses for securities companies, including joint ventures, in the second half of 2007. This deal is important as Treasury Chief Paulson has made gaining greater access to the Chinese financial sector a key objective. However there still seems to be no agreement on the dispute over China's undervalued currency. In July 2005, China abandoned an 11-year-old practice of holding the Yuan fixed against the dollar and revalued it by 2.1%. Since then it has risen only a further 6%, frustrating U.S. legislators who claim an undervalued currency makes Chinese products unfairly inexpensive and therefore this hurts the ability of US exporters to compete on the global markets, leaving the US with limited options to shrink its trade deficit. Today we will finally see some significant news coming out of the US after a relatively barren news week. At 13:30 GMT the US Durable Goods Orders figures will be released as well as the Jobless Claims figure which is expected to rise to 305K from a previous figure of 293K. This news will be followed by the release of the new home sales figure at 15:00 GMT which is expected to improve slightly from 858K to 860K. If these figures disappoint we may see this week's fledgling dollar rally begin to crawl back into the bear cave and it seems that the dollar retracement may have already began yesterday as the USD only gained ground against the Yen but it slipped against all the other majors. So today's economic news will be a particularly key turning point for the USD. EUR Yesterday the Italian retail sales figure released at 0.5% beating the previous months figure and the expected figure of 0.2%. This positive news was a further indication of the ever strengthening Euro-zone economy and the EUR gained all across the board. The EUR was slightly firmer against the USD yesterday ahead of today's German IFO survey which will be the main EUR market moving data of the week. This survey measures the mood of firms in manufacturing, construction, wholesale and retail. The index is derived from a monthly survey of over 7,000 firms where respondents are asked to give their assessment of the current business situation and their expectations for the next six months. So unlike the German ZEW survey, which focuses more on the past, the IFO survey will give a better indication of how robust the European economy really is and whether this strength is sustainable in the future. If this survey releases surprisingly strong we will see the EUR resume its bullish rampage. Elsewhere, the GBP gained all across the board yesterday after the BOE monetary policy meeting minutes for May showed all nine committee members voted to lift UK interest rates a quarter percentage to 5.50%. This marked the first time this year that the committee members unanimously voted to increase rates. Besides, the minutes revealed that some members even suggested an unprecedented 50 basis point increase in the meeting. The MPC minutes surprised the market that had expected an 8-1 vote. The sterling rose sharply from 1.9750 to 1.9880 versus the dollar. However there is still plenty of skepticism of whether the BoE will hike rates in the near future. JPY Improving prospects for interest rates in the US and the UK has given further impetus for the carry trades; this is where investors borrow money in countries with low interest rates in order to invest in higher-yielding assets elsewhere. So the JPY, which is the most common funding currency for carry trades due to the very low Japanese interest rates, came under fresh pressure reaching its lowest level since February against both the dollar and the pound. Also Japan's exports to the U.S. fell for the first time in two years, underscoring the nation's reliance on faster growing markets in Asia and Europe. Exports rose 8.3 percent in April from a year earlier, cooling from 10.3 percent in March. Shipments to the US dropped 4.8 percent, the steepest decline since May 2004. The Japanese market will be looking ahead to tomorrow's important CPI and core CPI figures. It seems that the Japanese consumer prices probably fell at a slower rate in April, signaling that inflation may turn positive again soon and allow the central bank to raise interest rates. The core consumer prices, which exclude fresh food, declined 0.1 percent from last year and according to estimates less than 0.3% drop in March. The BoJ Governor Fukui said last week that the central bank could raise interest rates even with prices falling, as long as policy makers are confident about the economic outlook. The consumer prices, which began falling in February, probably hit bottom in March and we should see improved CPI figures from now. This could provide the JPY with some relief from the persisting bearish trend that it has found itself trapped in. Technical News EUR/USD The pair is rallying down for the last 3 weeks and touched the 1.3415 level yesterday. The hourly studies are in oversold territory, and a bullish cross has formed on the daily chart. A correction up might be in place with a target price of 1.3550. GBP/USD The Cable has already initiated the move up after the big slide from the 2.0100 levels, and is now showing the first distinct signals on the bullish side. Hourlies are bullish, and the dailies still have much steam in it. USD/JPY The uptrend for the pair could not be any clearer, and all studies indicate there is still plenty more room to run. The pair now floats on the bottom of the upwards channel, indicating a further move up is imminent. USD/CHF The pair is still in the middle of the uptrend initiated at 1.2000, and now shows signals of a correction. Dailies are bullish, and the hourlies are a bit overbought. Buying on dips might be a preferable strategy. The Wild Card EUR/GBP The pair nose dived more than 150 pips in the last 4 days, and is now touching 0.6770 which is a strong local support. The dailies are turning bullish, and there is a very distinct bullish cross forming on the 4 Hour chart, allowing Forex traders a great opportunity to get in at a great low price and go long.
Thank you very much.
A clear picture of what is going on and easily understandable to bigginers like me. Thanks again
05/06/'07 - Fed Governor Warsh speaks today.
Economic News
USD
Yesterday, Monday, the dollar weakened due to weaker-than-expected factory orders in the United States. The EUR climbed to $1.3488 from $1.3443 on Friday after the U.S. Commerce Department reported orders to factories rose less than expected in April. Orders were up 0.3%. It was the weakest result in three months and less than half of the 0.8% increase that analysts expected. Markets are closely watching U.S. economic data for signs of future Federal Reserve interest rate decisions. The Fed has left its key interest rate unchanged at 5.25% over recent months, even as the European Central Bank has raised the cost of borrowing seven times since December 2005. Analysts expect the ECB to raise the rate to 4% when it meets Wednesday.
In other trading, the Canadian dollar continued its climb against the greenback after breaching 94 cents Friday for the first time in 30 years. The U.S. dollar bought 1.0588 Canadian dollars late Monday after hitting a low of 1.0547, however eventually the U.S. dollar bought 1.0618 Canadian dollars in the late Friday.
Analysts speculate that the Canadian currency will equal 1 U.S. dollar by year's end. The dollar also weakened against the Swiss franc, falling to 1.2235 from 1.2303.
Today the ISM Non-Manufacturing Index is due to be out and 55.3 figure is expected a slightly weaker figure from the last month's 56.0. Despite this, it seems that the greenback will keep its strengthening during the next 2 weeks or so.
EUR
After two days of releases on Thursday and Friday, yesterday proved more of a quiet day with very little of note being released. In the U.K. the May Construction PMI which came in lower at 58.0 and much below forecasts of 59.5 effects almost immediately on the market . Future business activity dipped to 71.8. While the numbers still show an expanding market the pullback following the softer house price numbers is bringing a hint that construction companies are slowing their expansion with the risk of a correction to the price bubble.
Inflation pressure is still in focus and some economists believe that an interest hike is inevitable. By hiking rates by 0.5% this coming Thursday, inflationary pressures might be forgotten, however the interest rate is unlikely to be changed by as much as 0.5% and likely not at all.
Euro-zone April PPI rose by 0.4% MoM and 2.4% YoY. This is slightly above forecasts of +0.3% and +2.3% respectively but with the annualized rate declining from 2.7% in March and retaining a downward path for the fourth consecutive month. The recent increase in oil prices clearly had an effect though the overall number still maintains a basically benign inflationary picture.
Even if inflation is under control the repeated comments from ECB board members remains hawkish with both Trichet and Weber commenting that Euro interest rates are still too low. Not that the market hasn't heard them before but it does make sure that everyone is agreed that the ECB will hike rates again this week to 4.0%.
Stateside April's Factory Orders were up by +0.3% MoM and Inventories by +0.5%. Forecasts had centered on numbers closer to +0.4% and +0.6% respectively. Orders excluding transport were up by a solid +0.7% and ex-defense by a lower +0.3%. Durable goods were reported as rising by +0.8%. The numbers are basically not too bad and while they are not about to excite the market they do tend to confirm the general strengthening in factory data.
JPY
Finally Fuji from Japan's MOF commented that he still sees Japan's corporate sector remaining solid and expects that confidence to spread into households at some point. However, there is one big 'but' to the scenario and that is the fact that consumers face an approximate rise in tax of 15% this year. FY 2006-2007 saw the revenue authorities providing a 10% rebate in tax while this year the adjustments in tax revenue between the national income tax and local inhabitants tax will increase national pension and health insurance payments that should amount to close to 5%. Corporate tax remains steady but profits are not being fed through to wages. It is difficult to imagine too much of a 'feel good' sensation spreading into households.
Today the Japanese May MOF Capital Expenditures Survey due to be out at 10.5% however it likely won't effect the market in any noticeable manner. The JPY still seemed to be traded at short range how ever the economy leaders in Japan are believing on the economy recovery of Japan.
Technical News
EUR/USD
On the 4 H chart we notice that the bullish trend is running out of steam and the short time scale charts are already showing a reversal signal. The Slow Stochastic is clearly overbought (crossing at 90) which only verifies our suspicions. Going short would seem to be preferable.
GBP/USD
On the 4 H we can see a bullish pennant which may imply a continuation of the bullish trend. RSI at 84 and Slow Stochastic cross at 92 only verify the overbought status.
Preferable strategy is to wait for a significant signal for going long so; traders, meanwhile, please hold your breath.
USD/JPY
In the last 10 days this pair has been traded in bullish channel (121.16 - 112.18) there is no signs of reversal yet, however a breach of the upper barrier may count as a verification of an upcoming bearish trend. Waiting for a positive signal would be the right thing to do.
USD/CHF
The 4 H chart implies of an upcoming reversal but not just yet, this pair is on its way to oversold territory while Slow Stochastic is crossing at (14). However, lack of technical patterns which is missing on these charts, prevents us of making recommendations.
The Wild Card
AUD/USD
This forex pair is clearly in overbought territory while RSI at 92 and Stochastic Slow is crossing on 86. The preferable strategy today would be going short. Forex traders have the opportunity of a great entry point for a swing trade. It looks as if the next price target is 0.8320.
Thank you very much. A clear picture of what is going on and easily understandable to bigginers like me. Thanks again
Hi Vrama....thanks for your feedback, I'm glad you're finding the analysis useful. You trading live yet? if you have any questions, don't hesitate to ask
- Free trading apps
- Over 8,000 signals for copying
- Economic news for exploring financial markets
You agree to website policy and terms of use
Economic News
USD
Yesterday the greenback was mixed against most of the major currencies as investors sought to weigh US economic prospects amid hopes that the world's largest economy will pick up steam later this year. The USD strengthened slightly versus the JPY touching the 121.66 level, as a record intraday high for US stocks meant that carry trades were back in action, but the US currency lost some ground against the EUR falling to 1.3459 from Tuesdays 1.3447 level. Sentiment on the US economy has brightened in the past week following better-than-expected reading on jobless claims, a surprise rebound in new home construction and an unexpected strong rise in industrial production. Hence traders are buying back the dollar as they continue to digest this series of robust economic indicators. After two days of top-level economic talks in Washington, the US and China claimed to have agreed on the need for economic and currency reforms. Paulson said Chinese officials agreed with the United States that their economy had to be "rebalanced" to take on a greater role as a global consumer and cut Beijing's reliance on exports for growth. That would help reduce a U.S. trade deficit with China that hit an all-time high of $233 billion last year and ease tensions over China's economic success. The most significant deal announced yesterday was one that commits China to remove a bar on new foreign securities firms and resume issuing licenses for securities companies, including joint ventures, in the second half of 2007. This deal is important as Treasury Chief Paulson has made gaining greater access to the Chinese financial sector a key objective. However there still seems to be no agreement on the dispute over China's undervalued currency. In July 2005, China abandoned an 11-year-old practice of holding the Yuan fixed against the dollar and revalued it by 2.1%. Since then it has risen only a further 6%, frustrating U.S. legislators who claim an undervalued currency makes Chinese products unfairly inexpensive and therefore this hurts the ability of US exporters to compete on the global markets, leaving the US with limited options to shrink its trade deficit. Today we will finally see some significant news coming out of the US after a relatively barren news week. At 13:30 GMT the US Durable Goods Orders figures will be released as well as the Jobless Claims figure which is expected to rise to 305K from a previous figure of 293K. This news will be followed by the release of the new home sales figure at 15:00 GMT which is expected to improve slightly from 858K to 860K. If these figures disappoint we may see this week's fledgling dollar rally begin to crawl back into the bear cave and it seems that the dollar retracement may have already began yesterday as the USD only gained ground against the Yen but it slipped against all the other majors. So today's economic news will be a particularly key turning point for the USD.
EUR
Yesterday the Italian retail sales figure released at 0.5% beating the previous months figure and the expected figure of 0.2%. This positive news was a further indication of the ever strengthening Euro-zone economy and the EUR gained all across the board. The EUR was slightly firmer against the USD yesterday ahead of today's German IFO survey which will be the main EUR market moving data of the week. This survey measures the mood of firms in manufacturing, construction, wholesale and retail. The index is derived from a monthly survey of over 7,000 firms where respondents are asked to give their assessment of the current business situation and their expectations for the next six months. So unlike the German ZEW survey, which focuses more on the past, the IFO survey will give a better indication of how robust the European economy really is and whether this strength is sustainable in the future. If this survey releases surprisingly strong we will see the EUR resume its bullish rampage.
Elsewhere, the GBP gained all across the board yesterday after the BOE monetary policy meeting minutes for May showed all nine committee members voted to lift UK interest rates a quarter percentage to 5.50%. This marked the first time this year that the committee members unanimously voted to increase rates. Besides, the minutes revealed that some members even suggested an unprecedented 50 basis point increase in the meeting. The MPC minutes surprised the market that had expected an 8-1 vote. The sterling rose sharply from 1.9750 to 1.9880 versus the dollar. However there is still plenty of skepticism of whether the BoE will hike rates in the near future.
JPY
Improving prospects for interest rates in the US and the UK has given further impetus for the carry trades; this is where investors borrow money in countries with low interest rates in order to invest in higher-yielding assets elsewhere. So the JPY, which is the most common funding currency for carry trades due to the very low Japanese interest rates, came under fresh pressure reaching its lowest level since February against both the dollar and the pound. Also Japan's exports to the U.S. fell for the first time in two years, underscoring the nation's reliance on faster growing markets in Asia and Europe. Exports rose 8.3 percent in April from a year earlier, cooling from 10.3 percent in March. Shipments to the US dropped 4.8 percent, the steepest decline since May 2004. The Japanese market will be looking ahead to tomorrow's important CPI and core CPI figures. It seems that the Japanese consumer prices probably fell at a slower rate in April, signaling that inflation may turn positive again soon and allow the central bank to raise interest rates. The core consumer prices, which exclude fresh food, declined 0.1 percent from last year and according to estimates less than 0.3% drop in March. The BoJ Governor Fukui said last week that the central bank could raise interest rates even with prices falling, as long as policy makers are confident about the economic outlook. The consumer prices, which began falling in February, probably hit bottom in March and we should see improved CPI figures from now. This could provide the JPY with some relief from the persisting bearish trend that it has found itself trapped in.
Technical News
EUR/USD
The pair is rallying down for the last 3 weeks and touched the 1.3415 level yesterday. The hourly studies are in oversold territory, and a bullish cross has formed on the daily chart. A correction up might be in place with a target price of 1.3550.
GBP/USD
The Cable has already initiated the move up after the big slide from the 2.0100 levels, and is now showing the first distinct signals on the bullish side. Hourlies are bullish, and the dailies still have much steam in it.
USD/JPY
The uptrend for the pair could not be any clearer, and all studies indicate there is still plenty more room to run. The pair now floats on the bottom of the upwards channel, indicating a further move up is imminent.
USD/CHF
The pair is still in the middle of the uptrend initiated at 1.2000, and now shows signals of a correction. Dailies are bullish, and the hourlies are a bit overbought. Buying on dips might be a preferable strategy.
The Wild Card
EUR/GBP
The pair nose dived more than 150 pips in the last 4 days, and is now touching 0.6770 which is a strong local support. The dailies are turning bullish, and there is a very distinct bullish cross forming on the 4 Hour chart, allowing Forex traders a great opportunity to get in at a great low price and go long.